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1.
In order to understand how the price of a good is determined in the free market, one must account for
A)the desires of demanders exclusively.
B)the desires of suppliers exclusively.
C)the desires of governmental agencies exclusively.
D)the desires of lobbyists exclusively.
E)the desires of demanders and suppliers.
2.
As the price of cookies increases, firms that produce cookies will
A)increase the supply of cookies.
B)increase the quantity of cookies supplied.
C)decrease the supply of cookies.
D)decrease the quantity of cookies supplied.
E)leave their production unchanged.
3.
The statment, "Holding all other relevant factors constant, consumers will purchase more of a good as its price falls." reflects the behavior underlying
A)the demand curve.
B)an increase in demand.
C)the supply curve.
D)a decrease in the demand curve.
E)the production possibilities curve.
4.
Suppose that both the equilibrium price and quantity of mustard rise. The most consistent explanation for these observations is
A)a decrease in demand for mustard with no change in supply.
B)a decrease in the supply of mustard with no change in demand.
C)a decrease in demand for mustard and a decrease in the supply of mustard.
D)an increase in demand for mustard with no change in supply.
E)an increase in the supply of mustard with no change in demand.
5.
Which of the following would not shift the supply curve for personal computers?
A)A decrease in the price of computer chips used in personal computers.
B)An increase in the demand for personal computers.
C)An improvement in the technology used to make personal computers.
D)An increase in the wage rate paid to workers who assemble personal computers
E)An earthquake centered in Silicon Valley, where many personal computers are made.
6.
The market for a good is comprised of
A)only buyers of the good
B)only sellers of the good
C)both buyers and sellers of the good.
D)only the price at which the good is sold.
E)none of the above.
7.
If the full marginal costs of producing a certain good are greater than the seller's marginal costs, then
A)the market will produce the socially optimal outcome.
B)the equilibrium price will reflect the true cost of production.
C)too little of the good will be produced.
D)too much of the good will be produced.
E)the total economic surplus will be maximized.
8.
When the demand for a good increases, firms respond by
A)increasing their supply.
B)decreasing their costs.
C)increasing their price.
D)increasing their quantity supplied.
E)decreasing their supply.
9.
A market in equilibrium would feature
A)excess supply.
B)unexploited opportunities.
C)excess demand.
D)wild variation in price.
E)no tendency to change.
10.
Suppose we know two facts: first, the market for hair restoring tonics experiences chronic shortages and second, government sets the price of hair restoring tonics. We can conclude
A)government has set the price above the equilibrium price.
B)government has set the price at the equilibrium price.
C)government has set the price below the equilibrium price.
D)government has set the price appropriately to aid the rich.
E)firms are not manufacturing enough hair restoring tonics.





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